It didn’t say that her death breached its rules. It may be written in the UK, but it’s still English.
This is artificial intelligence at work. It’s absolutely right, that dying is not capable of remedy, but the AI program was not written with rules that prevent sending letters to dead people.
You are in breach of condition 15.4(c) of your agreement with PayPal Credit as we have received notice that you are deceased...
You are right that this is a badly programed auto letter at work. Have a copy of each programed response printed out and read by an actual human would catch something like this.